During the 1980s it was widely discussed whether Europe’s economic problems was caused by its generous welfare states. At the time, extensive social protection programmes were seen as the main reason why Europe did not replicate the US ‘Job Miracle’. This wisdom was questioned at the start of the 1990s. Many empirical studies showed that there was no straight trade-off between social protection and economic flexibility (see, for example, Blank 1994). In this paper we will indeed argue that many welfare state programmes may foster - rather than hamper - economic flexibility.
European welfare states today are facing major challenges: globalisation, europeanization, ageing populations, dependency burdens, changing needs and social risks (see, for example, Ferrara, Hemerijk & Rhodes 2000, Leibfried & Pierson 1995, OECD 1998, Blöndahl & Pearson 1995, and, Esping-Andersen 1999). Despite their different nature such challenges are often said to be particular acute for two population groups, women and the less skilled, as they compared to other socio-economic groups are more likely to suffer from precarious jobs exposed to international low wage competition, cuts in public service jobs and provision, changing family patterns, and modest employment and income protection, if any.
For some observers these challenges represent irresistible pressures on the welfare state, and - echoing older functionalist arguments from neo-marxists (O’Connor 1973, Gough 1979, and, Offe 1984) and logic of industrialism proponents (e.g. Wilensky 1975) - they tend to argue that current types of welfare states will not make it far into the 21st century. Often they argue that these pressures will lead to a convergence of welfare states, often portrayed as a ‘race to the bottom’. It goes without saying that it is primarily countries such as the Scandinavian with extensive and generous types of welfare states that are portrayed as having the greatest difficulties and thus the largest potential for qualitative change.
At the same time, policy makers vehemently reject such apocalyptic prophecies. Throughout Europe government responses to current challenges seem universal. More and better work is the mantra of European political leaders. More people in work is the recipe to cure the current diagnosis of fiercer competition, budget constraints, and withering social cohesion and inclusion. For
example, the strategic goal for the EU in the next decade as set out at the Summit in Lisbon 2000 is
“to become the most competitive and dynamic knowledge-based economy capable of sustainable
economic growth with more and better jobs and greater social cohesion” (EU 2000). One target is
”to raise the employment rate as close as possible to 70% by 2010” (EU 2000). One of the main questions today is therefore whether the functionalist prophecies are likely to come through or whether policy makers can make a difference through proactive policies to secure more people employment and thereby also make welfare states economically sustainable.
As mentioned women and the less skilled are generally among the groups perceived as the ones in the greatest danger of loosing out. This may be for good reasons. Table 1 below describes the labour force participation rate of men and women by their educational attainment. It shows that the labour force participation rate rise with educational level in nearly all European countries, both among men and even more so among women. What is more, the gender gap in labour force participation decreases with increasing educational attainment.
Table 1.
Labour force participation rates by level of educational attainment and gender for persons aged 25-64, 1998
Men Women
Notes: Educational levels: 1. denotes below upper secondary education (ISCED 0/1/2), 2. denotes upper secondary and post-secondary non-tertiary education (ISCED 3 (A/B/C)/4), 3. denotes tertiary-type B (ISCED 5B), 4. denotes tertiary-type A and advanced research programmes (ISCED 5A/6).
For policy makers the lessons are clear. The greatest potential to increase employment and labour force participation in most countries is to facilitate women’s and less-skilled’s entry into the labour market and into work. Hence, the aim of this paper is to look at welfare state capacities to help these two groups into employment. Focus will primarily be on the Nordic countries as they are known of being heavy on services and active labour market policies, both policy measures supposed to be advantageous for women and less skilled. In contrast other west European countries play a greater emphasis on cash transfers and less on services. For these reasons Scandinavian countries may have particularly interesting stories to tell with regard to women and less skilled.
On this general background, this paper addresses three basic questions. First, through which operations or mechanisms can welfare states actively contribute to bring more people into work, looking primarily on the situation of women and less skilled? Second, how are these operations being translated into policies in a number of European countries, primarily Nordic? Third, what is the recent development of these policies in the Scandinavian, and, in more detail, in Denmark?
The analysis of the paper can be seen as going through a funnel. At the top we present some overall characteristics of and data on welfare state regimes in relation to the labour market. At the middle of the funnel we make use of data on social and employment policies. And at the bottom we present detailed information on such policies and their effects for Denmark only. It is hoped that this strategy will provide a way of showing some general features often missed by single case studies and some insight into the fine mechanisms of social protection and labour markets often obscured by aggregate cross-national data.
In so far as possible, six European countries are compared. Denmark, Finland, and Sweden as representing a Scandinavian model. For comparative purposes Germany and the Netherlands are included to represent a Continental European model whereas the United Kingdom represents an Anglo-Saxon model. If welfare state policies bundle together in specific cluster or welfare state regimes, we would expect (1) less variation between countries within these regimes than between countries from different regimes, and (2) that variation tend to follow these regimes types. In so far as welfare state policies do make a difference to the employment of women and less-skilled, we may also expect regime specific policy variation to be reflected at least partly by variation in employment.
The paper proceeds as follows. First, we set out some basic operations of the welfare state in relation to the labour market which help us to identify distinct type of welfare state strategies to foster full (read: more) employment. Second, these operations and strategies are coupled with their actual policies in a description of their design across countries and over time. Third, as activation is a, if not the, key issue in most countries we look in more detail as to how this objective has been pursued in recent years in Denmark and to what success. Finally, we discuss the large role of the state in the Scandinavian countries when trying to secure objectives of full employment, its drawbacks and advantages, and the extent to which it may be an inspiration for other countries.